Small-cap stocks just had their historic week in three years, and one exchange-traded fund expert predicts the group’s all-time highs will help bring investors back into the group.
“Small-cap stocks are going to be more popular in 2025,” VettaFi’s Todd Rosenbluth said on CNBC’s “ETF Edge” this week. “They started to pick up steam after the election and as interest rates came down leading up to the election.”
Rosenbluth, the firm’s head of research, expects small-cap ETF funds to benefit investors looking to expand their market exposure.
The Russell 2000, which tracks small-cap stocks, hit an all-time high this week for the first time since November 2021 and just posted its best monthly performance since December of last year. The index was up about 11% in November and 35% over the past 52 weeks as of Friday’s close.
Rosenbluth suggests that profit-taking in the “Magnificent Seven” stocks, which includes Apple, Microsoft, Alphabet, Amazon, Nvidia, Metaplatforms and Tesla, will benefit small-cap stocks. He also expects investors to leave money market accounts as a result of the Federal Reserve’s policy of easing interest rates.
“We expect to see more dispersion in the winners,” Rosenbluth said.
Rosenbluth pointed to the iShares Core S&P Small Cap ETF and the VictoryShares Small Cap Free Cash Flow ETF as potential ways to capitalize on the strengths of small-cap stocks. The Core S&P Small Cap ETF rose 11% in November, and the VictoryShares fund rose nearly 8%.
